Market outlook remains cautious in the near term

Indian markets which witnessed a subdued trend through the week, may continue to consolidate, after the sharp run-up witnessed during September.

Markets across the globe are taking a breather given the sharp rally of the past few weeks, as the impact of the monetary easing stance by central bankers continues to wane.

Domestically, the earnings season kicked-off with the results of Infosys, which put up a poor guidance. The stock is likely to come under pressure in the next few trading sessions. The results of HDFC Bank were in line with market expectations.

Next week the results of heavyweights will gradually unfold, starting with the results of Reliance Industries which will unveil its financial performance on Monday. Analysts expect a muted performance from the company. Markets have rallied sharply and earnings will now have to play catch-up and if they disappoint, indices are likely to fall and correct sharply.

On Monday, WPI inflation numbers would be due and markets are likely to closely watch these numbers. Any figure closer to 8% is likely to see markets reacting negatively, as this would dissuade the RBI from cutting rates.

The CPI numbers and the WPI numbers are keenly watched by the RBI before its October 30, Monetary Policy review in which it will decide whether to keep repo rates on hold or cut the same.

Markets are likely to remain choppy with a negative bias next week, given that the US closed with losses for the week and which were the worst losses in four months.

Investors should continue to take shelter in defensives like consumer staples and pharma companies, while reducing exposure to high beta names.